LendingTree, Inc.

Good day and thank you for standing by. Welcome to LendingTree 4th Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Wessel, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle, and good morning to everyone joining us on the call this morning to discuss when we treat fourth quarter 2022 financial results. On the call today are Doug Ledda, LendingTrees chairman and CEO, J.D. Moriarty, president of Marketplace and CLO, Trent Ziegler, CFO, and Scott Paride, president of insurance. As a reminder to everyone, we posted a detailed letter to shareholders on our investor relations website earlier today. And for the purposes of today's call, we will assume that listeners have read that letter and will focus on Q&A. Before I hand the call over to Doug for his remarks, I remind everyone that during today's call, we may discuss LendingTree's expectations for future performance. Any forward-looking statements that we make are subject to risks and uncertainties, and LendingTree's actual results could differ materially from the views expressed today. Many but not all of the risks we face are described in our periodic reports filed with the SEC. We will also discuss a variety of non-GAAP measures on the call today, and I refer you to today's press release and shareholder letter, both available on our website for the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP. And with that, Des, please go ahead.

Thank you, Andrew, and thank you all for joining us today. We are excited to provide earning results this morning, but first I wanted to call attention to our launch of the LendingTree WinCard, our first product introduction in the reimagining of the MyLendingTree offering that was announced this morning. We believe the win card offered exclusively to MyLendingTree members will improve user engagement as the 2% cashback feature is only unlocked when cardholders log into their MyLendingTree account. And because the win card is among the first cards to be integrated with our TreeQual product, we are expecting approval rates to be substantially higher, which will also improve our unit economics and customer satisfaction. We have many new features and products like this planned for introduction as we move through 2023 and beyond. The focus of all of this work is to combine our market-leading partner network with a best-in-class customer experience. We believe the innovative products, such as the win card, in addition to the planned enhancements we are hard at work on, will make MyLendingTree the leading destination for our customers to shop for all of their product needs. Moving on to our results. In the fourth quarter, our insurance division posted excellent results. This can be attributed to initiatives that Scott and our insurance team put in place to focus on higher-intent customer traffic to help our insurance partners improve conversion rates. Because of this, we were able to capture increased budgets from insurance carriers, and at the same time, reducing marketing costs. The team did a tremendous job executing on all of these projects, which led to margin improvements by a full six points from the third quarter. When carriers spend returns to normalized levels, we expect these initiatives will be rewarded with increased market share. Our home segment, not surprisingly, faces a very challenging part of the interest rate cycle. The Fed's commitment to higher rates to subdue inflation will continue to have a negative impact on new mortgage loan demand. Additionally, lenders are seeing lower conversion rates because there is less benefit to refinancing as interest rates rise. A close integration with our largest partners helped us to quickly pivot to sourcing cash-out borrowers who are looking to tap the substantial amount of equity they enjoy as homeowners today. This year, we expect cash-out transaction will remain the bulk of our revenue opportunity at home. However, our key growth initiative within the segment is to gain share in the purchase market by improving close rates for our partners. To the extent we see a pickup in purchase application rates as we move through the year, we believe this project will have a positive impact on our financial results. In our consumer segment, we saw throughout the second half of 2022, lenders tighten underwriting criteria due to higher interest rates and the slowing effect they have on our economy. A stricter credit environment generally leads to lower close rates for our lenders, which reduces our revenue. Despite the decline in fourth quarter consumer revenue, we are able to grow segment profit by relentlessly focusing on unit economics. Our growth initiatives in consumer include completing technology enhancements for our credit card business, which we believe will help to improve financial results going forward. In small business, we are also implementing technology solutions to automate capture of applicant financial data, which will help better segment our traffic for our lending partners to also increase close rates. Additionally, we remain intensely focused on operating expenses. We recognize it is a key financial metric that is entirely within our control. The variable marketing model this company was built around is designed to avoid outspending the revenue opportunity available. And similarly, it is our job to properly manage our fixed costs based on our outlook for future revenue. We will invest in projects when we see an attractive risk-adjusted return. We are doing that currently to support the improved customer experience and our other key growth initiatives. However, we will also move quickly to decrease funding for parts of our business that are unable to meet return targets, evidenced by our exit from the reverse mortgage segment in the fourth quarter. This commitment to financial discipline will remain a key tenet of our day-to-day activities as a leadership team. And now, operator, I'd be happy to open the call for questions.